FIN 302 Exam 3

Which one of the following statements is correct concerning market efficiency?

A firm will generally receive a fair price when it issues new shares of stock if the market is efficient

Which one of the following should earn the highest risk premium based on CAPM?

Stock with a beta of 1.38

The common stock of Alpha Manufacturers has a beta of 1.24 and an actual expected return of 13.25 percent. The risk-free rate of return is 3.7 percent and the market rate of return is 11.78 percent. Which one of the following statements is true given this information?

The actual expected stock return indicates the stock is currently overpriced.

Which one of the following statements is correct?

The value of a call increases as the exercise price decreases.

Which one of the following statements concerning warrants is correct?

When a warrant is exercised, the number of outstanding shares increases.